• Monday, December 11, 2023
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FG records N15.7trn revenue shortfall in eight years

FG’s revenue shortfall heads for 12-year high

The federal government recorded a revenue shortfall of N15.7 trillion revenue shortfall in the last eight years, according to data compiled by BusinessDay.

The recently published 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) showed Africa’s biggest oil-producing country has struggled to meet its revenue target of N52 trillion in eight years, creating a shortfall of N15.7 trillion as at June 2023.

“All the government programmes to increase revenue have failed, except for growing ‘independent revenue’ from Federal Government-owned agencies,” Seun Smith, a public finance analyst, said. “Even if the new tax reform committee is relatively successful, I expect it will take a few years to show results.”

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A further breakdown showed that in the first six months of 2023, the federal government projected N6.44 trillion as revenue to fund its budget but made only N5.19 trillion (80 percent of expected revenue).

“At a time of existential economic crisis, headlined by widespread poverty, insecurity and galloping inflation, federal government’s commitment of billions of naira to luxury items in the 2023 supplementary budget is insensitive to young Nigerians struggling to eke out a living,” a senior economist told BusinessDay.

In 2022, the federal government’s projected revenue was N9.97 trillion, while actual revenue was N8.81 trillion, creating a shortfall of N1.16 trillion.

In 2021, the federal government recorded a shortfall of N2 trillion as revenue projection stood at N6.64 trillion while actual revenue was N4.64 trillion. In 2020, there was a shortfall of N1.8 trillion as the government’s projected revenue was N5.84 trillion, but actual revenue amounted to N4.04 trillion.

In 2019, revenue projection was N6.99 trillion and realised revenue was N4.12 trillion, creating a shortfall of N2.87 trillion. In 2018, revenue projection was N7.17 trillion, while the government realised N3.87 trillion.

In 2017, the revenue projection was N5.08 trillion while revenue realised was N2.66 trillion; in 2016, the federal government’s projected revenue was N3.86 trillion, but it realised only N2.95 trillion.

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“In one glance, I hear the government demanding the people to make sacrifice; in another glance, I see the lifestyle of public officials, in the cost of governance, in the 25-car convoy, or the contingency travel,” said Oluseun Onigbinde, co-founder of BudgIT, a civic organisation focused on strengthening civic engagement and institutional accountability.

“You can’t have people struggle and those in public office enjoying themselves; that perception has to be clear,” he added.

Other analysts questioned why the federal government continued to allocate scarce resources to more Sport Utility Vehicles and renovation of presidential residences when more than half of its population are living in abject poverty.

“Fuel subsidies had to go for Nigeria’s economy to survive. Having done it, what’s the sacrifice for our political elite? The cost of governance is too high,” Kingsley Moghalu, founder and president of IGET and a former deputy governor of the Central Bank of Nigeria, said on X.

Further findings from the MTEF and FSP showed Nigeria’s capital importation for three consecutive years declined from an annual level of $16.812 billion in 2018 to $5.32 billion in 2022.

As shown in the document, quarterly capital importation also declined by 51.51 percent from $2.187 billion recorded in the fourth quarter of 2021 to $1.06 billion in Q4 2022.

According to the report, trade deficits, loans, and currency deposits represented the largest component of capital importation in 2022, accounting for 65.17 percent ($691.23 million) of total capital importation in Q4 2022.

This is followed by foreign portfolio investment (26.89 percent or $285.26 million) and foreign direct investment (7.94 percent or $84.23 million).

Lekan Ademola, a Lagos-based asset manager, said Nigeria is living above its means with the struggling FDI and rising revenue shortfall.

“Nigeria has ignored its revenue challenge by going on a recurrent expenditure spree. Yet, this has not impacted the economy, which has been stuck in a low growth path despite higher cost of governance,” Ademola said.

The huge financial burden of Nigeria’s recurrent expenditure is fuelling confusion among economists and business leaders who are at a loss on why a supposedly cash-strapped government is losing billions of dollars to violating public contract laws.

For instance, Agora Policy, an Abuja-based think tank, said the country is losing at least $10 billion annually due to a lack of transparency and accountability in public contracts procurement.

According to a report by Agora Policy, Nigeria’s current public procurement practices established significant correlation between weak public procurement procedures and corruption and its associated consequences such as poverty, infrastructural deficits and underdevelopment.

“The assessment put the government’s revenue loss to underhanded transactions at 60 percent, averaging $10 billion annually,” the report said.

Agora Policy identified inflation of contract costs, absence of procurement plans, poor project prioritisation, poor budgeting processes, lack of competition and manipulations of procurements in Nigeria’s contract award processes.